The Commerce Commission is considering investigating a lender over its approach to recovering money owed to it.
Save My Bacon is just one of a growing number of online companies offering short term loans with interest of 500 percent per annum, loans approved the same day with no surprises, or so the advertising goes.
But read the fine print and borrowers soon discover there are some serious consequences if they find they are not able to keep up with their payments.
Among the forms is one permitting Save My Bacon to approach an employer and dock wages in order to recover outstanding funds.
It says in bold type the borrower is signing up for a quote, "irrevocable assignment of wages".
While this is allowed, the Commerce Commission said a wage deduction authority should not be described as "irrevocable" as this was prohibited by the Wages Protection Act.
It said describing things this way "may mislead consumers as to their rights" and "risks breaching the Fair Trading Act."
What action if any it would decide to take remained to be seen.
The commission advises people to read their contracts carefully, especially if they are giving consent to having their wages deducted.
But Don Johnson from the Christchurch Budget Service said somebody wanting one of these loans was unlikely to ask too many questions.
"People who have gone to a pay day loan generally want to do something like feed their children, they haven't got enough money to get through to the next pay day ... it might be the power bill ... they are desperate."
Save My Bacon chief executive Kent Gillman was not available to be interviewed but did provide a statement.
Save My Bacon statement
- Borrower welfare is paramount to us.
- We work really hard at the time of granting a loan to ensure that people are able to repay us. We decline 70 percent of new applications.
- We recognise that circumstances can change and we work with people when this happens.
- Our advice to people who are in financial trouble is to keep communicating with the people they owe money.
- WDAs [Wage Deduction Authorities] are only used as a last resort for people who refuse to communicate with us.
A former employee of Save My Bacon, who spoke to RNZ on condition of anonymity, said she left the company after becoming uncomfortable about the way it operated.
"The type of person who would use those high interest loans ... they were from low socio-economic backgrounds and that didn't sit very well with me."
She said borrowers would often not read the fine print until after they got into trouble meeting their repayments, despite the consequences being pointed out to them by Save My Bacon staff at the time the loans were issued.
"Those types of loans are designed to feed a need at the time ... I guess when you are faced with a situation, you actually need the money, it doesn't really matter, you can't hear that."
Mikhala Jordan said she used the services of a short term loan company similar to Save My Bacon when things got tight financially but wouldn't do so again.
"Because we got a $200 loan and we had to pay $303 back. It's a lot of money going back to them."
Most of those spoken to on the streets of Christchurch today were aware of the pitfalls involved in taking out high interest, short term loans and said they would only use them as a last resort.